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Vicem chairman discusses cement prices, exports

Update: March, 06/2014 - 09:03
Viet Nam has had an over-supply of cement in the domestic market during the past two years, resulting in many enterprises exporting their stockpiled cement. However, there are those who believe that exporting cement is just a temporary solution, due to the slow consumption in the domestic market during a period in which construction has fallen and export prices remain lower than local selling prices. Chairman of the Viet Nam Cement Corporation (Vicem) Luong Quang Khai spoke to Vietnam News Agency about these issues.

Is the export price of cement lower than local selling prices?

Luong Quang Khai

Export prices are at US$38-39 per tonne for Vietnamese clinker and $55 per tonne for Vietnamese cement.

Meanwhile, the selling price of cement at factories of Vicem are also at a similar rate, while the retail price of cement on the local market stands at around VND1.3-1.4 million ($61.9-66.7) per tonne, which includes the cost for transport and operation of scale systems.

This export price could not compare with selling prices in the local market because the export price is a wholesale price, while the selling price on the local market is the retail price.

Meanwhile, the retail price remains higher than the selling price at factories because retail prices include the cost of transport and cost for operation of scale systems.

Therefore, I can confirm that at cement factories, export prices are not lower than selling prices in the local market.

What is your opinion about exports of cement?

Cement is a heavy product, so selling it near markets, particularly local markets, is best, since exporting cement to far off places would not be efficient.

So, cement makers want to sell on the local market because they can control capital and have continued development in local markets.

However, they should still export cement and they should have cooperation in exporting cement among each other to gain the most efficient export expenses.

In Viet Nam, building season is a time of high consumption, but in the current period, especially the rainy season, cement consumption is low, so manufacturers should export cement at low consumption times to reduce inventories, since cement factories cannot stop production.

If they stop production, they would have huge losses since they still pay interest rates on loans for production.

A main task of enterprise is efficiency in production and business, and exporting is the correct solution to increase efficiencies for an enterprise during periods of low consumption in the local market.

Also, exports reduce inventories of cement on local markets, bring in foreign currency and increase efficiencies for investments in production.

Asia, Thailand and South Korea have hosted major cement exporters for many years. Viet Nam has only recently joined the export market, as the nation often produced enough cement for its domestic market use.

Export prices of Vietnamese clinker are at VND800,000 ($38) per tonne. Meanwhile, local retail prices of Vietnamese clinker increased to VND730,000-740,000 per tonne from VND630,000-650,000 because of the surge in exports.

If clinker had been stored only for domestic use, the price of clinker on the local market would drop further, causing production to cease.

With those prices, cement makers take in enough capital to continue production.

For instance, Hoang Thach Cement Factory, with a total capacity of 4 million tonnes per year, had an inventory of 500,000 tonnes of clinker in 2012 because of its exports.

But since 2013, the factory has begun to export products to solve inventory problems. The factory has operated at full capacity to sell its products at home and abroad, seeing an increase of 17 per cent in profits to VND300 billion ($14.21 million) for 2013 against 2012.

For the long term, the cement industry should maintain a reasonable output of clinker and cement, because clinker and cement are heavy products and need high costs of transport and storage, impacting profits of cement producers.

Vicem member companies hold 38 per cent of the local cement market. How does Vicem regulate export prices of Vietnamese cement?

At the end of 2012, exports of cement and clinker were carried out by intermediaries, so export prices fell by a few US dollars per tonne.

Therefore, Vicem called its member companies to unify export activities and increase export prices to maintain its reputation and market.

As a result, since mid-2013, export price of Vietnamese clinker increased by $2 per tonne to $39.

Vicem expects to receive supports from the Ministry of Construction and the Viet Nam Cement Association to increase the professionalism of its cement export activities and long-term strategic partners to increase efficiencies in exporting cement. — VNS

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